For the purposes of paragraph 45B(2)(c), the Commissioner is required to consider the 'relevant circumstances' set out in subsection 45B(8) to determine whether any part of the scheme would be entered into for a purpose, other than an incidental purpose, of enabling a relevant taxpayer to obtain a tax benefit. 7. If Maria chooses the indexed cost base, she calculates her cost base by multiplying her original cost base by an uplift factor. 43. This represents a total return of approximately $579 million to Wesfarmers shareholders. 70. NO 1-PVCWOSF, Legislative References: 58. 20. If the amount of the return of capital of $2.00 per Wesfarmers share is not more than the cost base of your Wesfarmers share, the Cost base / reduced cost base of the share are reduced (but not below nil) by the amount of the return of capital (subsection 104-135(4)). After the share consolidation, Wesfarmers shareholders will own fewer shares that are proportionately higher priced. 3.7 Cash return of capital amount per +security AUD 2.00000000 Part 4 - Changes to option pricing as a result of the cash return of capital 4.1 Will the cash return of capital affect the exercise price of any +entity-issued options? The return of capital was made possible by the Wesfarmers Groups continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. The proportion of funding from each source was determined having regard to the most cost-effective source of funding available as at the date of payment. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations. Details of this re turn of capital are set out in paragraphs 14 to 46 of this Ruling. How do I adjust the cost base and reduced cost base of my Wesfarmers shares? For shares that had reached a taxing point (i.e. 26. He paid $2,900 ($14.50 per share) plus brokerage of $150 - making his cost base $3,050, or $15.25 per share. On 27 August 2021, Wesfarmers announced that it will return share capital to Wesfarmers shareholders of $2.00 per Wesfarmers share totalling $2.3 billion (return of capital). 32. Wesfarmers Ltd. published this content on 08 December 2021 and is solely responsible for the information contained therein. If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. As with dividend payments, payments of the distribution to shareholders with a registered address in Australia, New Zealand and the United Kingdom were made by way of direct credit to a financial institution in Australia, New Zealand or the United Kingdom, as applicable, (including a bank, building society or credit union account). Depending on the outcome, you may have to include some details on your 2003-04 tax return. The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. The following is a detailed contents list for this Ruling: 2. 39. Wesfarmers primary objective is to deliver satisfactory returns to shareholders through financial discipline and strong management of a diversified portfolio of businesses. Wesfarmers Limited (WES) completed the demerger of Coles Group Limited (COL) on 28 November 2018. ITAA 1936 45B(3) 56. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers shareholders. If you made a capital gain on this CGT event, you must include it in your calculations when completing item 17 on your 2003-04 tax return (supplementary section). This is clearly marked. Maria's capital gain is $200 ($2,500 - $2,300). to make a short-term or 'one-off' commercial gain. 2. ITAA 1936 45B What will happen to the number of shares I hold? ITAA 1997 995-1(1) The Australian Taxation Office has given Wesfarmers the all-clear to hand over $1.1 billion to shareholders. 72. Return of Capital = $750 Fully Franked Dividend = $250 Units on hand after consolidation: 983 (1000 x 0.9827 - rounded to the next whole number of shares - See Point 25 in the ATO Class Ruling 2014/76 ). The Payment Date is anticipated to be late November to early December 2013. All legislative references in this Ruling are to the Income Tax Assessment Act 1997 unless otherwise indicated. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. 50. 39. She paid $2,200 ($2.20 per share) plus brokerage of $100 - making her cost base $2,300. 37. Section 45A - streaming of dividends and capital benefits. Wesfarmers shareholders received a 200 cents per share cash distribution. return of capital on shares 28. 29. 54. There was no share consolidation in relation to the capital return. You received 200 cents for every share you held as a registered holder on the record date of 4:00pm (Perth time) Friday, 19 November 2021. ITAA 1997 Div 112 ITAA 1936 45A A Wesfarmers shareholder who is a foreign resident or the trustee of a foreign-resident trust for capital gains tax (CGT) purposes, and received the return of capital, can disregard any capital gain made if CGT event G1 happened or disregard any capital gain or capital loss if CGT event C2 happened under section 855-10, provided also that your Wesfarmers share or your right to receive the return of capital on the Wesfarmers shares: 15. Accordingly, no part of the return of capital will be taken to be a dividend for income tax purposes. The cost base of your right to receive each return of capital is worked out under Division 110 (modified by Division 112). As discussed in paragraph 52 of this Ruling, the payment of the return of capital to Wesfarmers shareholders will be a capital benefit. 46. CGT event C2 happened when the return of capital was made. ITAA 1997 855-10(1) Therefore, the Wesfarmers shareholders will be provided with a capital benefit under paragraph 45B(5)(b). The ruling applies from 1 July 2021 to 30 June 2022. The method you use to work out the amount to include in your item 17 calculations depends on when you acquired the shares. You can treat a capital gain made when CGT event G1 or CGT event C2 happened as a discount capital gain if you acquired your Wesfarmers shares at least 12 months before the Payment Date (subsection 115-25(1)), provided the other conditions in Subdivision 115-A are satisfied. Aussie supermarkets set to capitalise on high inflation, but softer demand ahead, WESFARMERS LIMITED : Ex-dividend day for interim dividend, Out of lockdown, Kmart pushes Australia's Wesfarmers to higher profit, Transcript : Wesfarmers Limited, H1 2023 Earnings Call, Feb 15, 2023, Wesfarmers Raises Dividend as Fiscal H1 Profit, Revenue Increase, Australian Stock Exchange - 12:10:24 2023-03-01 am EST. 6. For those shareholders who are not tax residents of Australia and hold their shares on capital account, no Australian income tax implications should arise as a consequence of the return of capital. The Class Ruling confirms the availability of demerger tax relief for certain Wesfarmers shareholders. Ruling Return of capital is not a dividend 7. The ATO has issued Class Ruling CR 2018/59 . The Australian Taxation Office (ATO) has published a Class Ruling in relation to the taxation treatment of the $2.00 per share return of capital to Wesfarmers shareholders, which was paid on 2 December 2021. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. Wesfarmers has confirmed that its share capital account is not tainted within the meaning of Division 197. if the cost base (after any adjustment, as may be relevant, for any indexation, any previous return of capital or as a result of the Coles demerger) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. The share consolidation will occur after the return of capital to Wesfarmers shareholders, and will be applied to both the fully paid ordinary shares and the partially protected ordinary shares. Using this method, Maria has made no capital gain on the return of capital, so she does not have to put anything on her 2003-04 tax return to reflect this event. 64. The total amount of the distribution was approximately $2,268 million and was paid on Thursday, 2December 2021. 81. ITAA 1997 Div 230 If a Wesfarmers shareholder makes a capital gain from CGT event G1 happening, the cost base and reduced cost base of the Wesfarmers share is reduced to nil. For each of these shares, you have made a capital gain of: For shares with a cost base equal to or greater than $2.50, you have made no capital gain as a result of the return of capital. The return of capital satisfies the first two conditions. If the return of capital of $2.00 per Wesfarmers share you received was not more than the cost base of the share, the Cost base / reduced cost base of each share is reduced by the amount of the return of capital (subsection 104-135(4)). 33. Taxation Administration Act 1953. Corporations Act 2001. A CGT event will not happen if a company converts its shares into a larger or smaller number of shares (the converted shares) in accordance with section 254H of the Corporations Act in that: While there is a change in the form of the original shares, there is no change in their beneficial ownership. ITAA 1936 45A(3)(b) If there was any residual from the return of capital payment after the payment had been applied to your loan balance, the remaining balance was paid directly into your bank account on Thursday, 2 December 2021. Payments made to credit unions may take longer. ITAA 1997 975-300(3) In working out the capital gain or capital loss made when CGT event C2 happens, the capital proceeds will be the amount of the return of capital ($0.50 per fully paid share) (subsection 116-20(1) of the ITAA 1997). Wesfarmers provided separate information in relation to the tax implications of the return of capital payment for participants who were located within Hong Kong and India at the time of the capital return payment. 36. In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers credit rating. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Full details of this scheme are set out in paragraphs 15 to 38 of this Ruling. share capital, Legislative References: Taking into account Wesfarmers robust credit metrics and continued strong cash flows, the Board considered that the return of capital would not adversely affect Wesfarmers credit rating. For those employee shareholders who hold their shares within an Australian Wesfarmers employee share plan, are tax residents of Australia, only work in Australia and hold their shares on capital account at the time the return of capital was paid, the tax implications of the return of capital are as follows: Following the payment date, Wesfarmers provided Australian participants with a statement that set out the taxation implications of the return of capital payment and where applicable information in relation to any cost base adjustments. For your other shares - reduce the cost base and reduced cost base by $2.50 each. The capital loss is equal to the amount of the difference (subsection 104-25(3)). The distribution comprised a return of capital of 75 cents per share and a fully-franked dividend of 25 cents per share. Therefore, you can treat a capital gain made when CGT event C2 happened to your right to the payment of the return of capital as a discount capital gain under Subdivision 115-A if you acquired your Wesfarmers share at least 12 months before the Payment Date (subsection 115-25(1)) provided the other conditions in Subdivision 115-A are satisfied. Section 45A - streaming of dividends and capital benefits. 40. As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. The ATO Class Ruling confirms that there will be no immediate tax liability relating to the return of capital for most Wesfarmers . The uplift factor is worked out by dividing 123.4 by the consumer price index for the December quarter of 1986 (79.8) and is 1.546 (rounded to three decimal places). Class Ruling CR 2014/76 Page status: legally binding Page 1 of 29 Class Ruling . Shares in Wesfarmers will be 'an indirect Australian real property interest' if (among other things) they pass the principal asset test in section 855-30. In November 2007, Coles Group Ltd (Coles Group) was acquired pursuant to a scheme of arrangement. ITAA 1997 109-5 ITAA 1936 45B(2)(c) By contrast, a dividend would generally be included in the assessable income of a resident shareholder or in the case of a foreign resident, be subject to dividend withholding tax under section 128B. Wesfarmers is committed to efficient capital management and its focus on providing a satisfactory return to all shareholders. These included the divestment of Wesfarmers interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers post-demerger 15 per cent shareholding in Coles. The cost base of a Wesfarmers shareholder's right to receive the return of capital is worked out under Division 110 of the ITAA 1997 (modified by Division 112 of the ITAA 1997). 18. The Australian Taxation Office (ATO) has published a Class Ruling in relation to the taxation treatment of the $2.00 per share return of capital to Wesfarmers shareholders, which was paid on 2 December 2021. Australian Taxation Office (ATO) Class Ruling . Shareholders were sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021. However, having regard to the relevant circumstances of the scheme, it cannot be concluded that the scheme was entered into or carried out for a more than incidental purpose of enabling Wesfarmers shareholders to obtain a tax benefit. ITAA 1997 104-135 ITAA 1997 855-10 Corporations Act 2001 256C. 44. The term 'dividend' in subsection 6(1) includes any distribution made by a company to any of its shareholders. You will make a capital gain under CGT event C2 if the capital proceeds from the ending of the right are more than the cost base of the right. Ruling Return of capital is not a dividend 7. 31. The return of capital was funded by a combination of Wesfarmers available cash balances and existing debt facilities. Wesfarmers announced a proposed return of capital on 15 August 2013 with Wesfarmers returning to each shareholder $0.50 per fully paid share. The term 'dividend' is defined in subsection 6(1) of the ITAA 1936 and includes any distribution made by a company to any of its shareholders. ITAA 1936 45B(5)(b) Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people, An indirect Australian real property interest not covered by item 5, A CGT asset used at any time in carrying on a business through a permanent establishment in Australia and which is not covered by items 1, 2, or 5, An option or right to acquire a CGT asset covered by items 1, 2 or 3. At 30 June 2007, Wesfarmers' share capital was $2,256 million, with retained earnings of $1,131 million (effectively $588 million after the final 2007 dividend of $543 million). The last date to purchase shares that were eligible to receive the return of capital was Wednesday, 17 November 2021. The assets disposed of were Wesfarmers' interests in Wesfarmers Bengalla Pty Ltd, Wesfarmers Curragh Pty Ltd, Tyre & Auto Pty Ltd and Quadrant Energy Holdings Pty Ltd, as well as 10.1% of Wesfarmers' 15% shareholding in Coles Group Limited. The purpose which causes section 45B to apply may be the purpose of any party to the scheme. Following the payment of the special dividends, Wesfarmers determined that $2.3 billion of the remaining balance of the proceeds from the asset disposals of approximately $2.925 billion was surplus to its capital requirements. If, after the Record Date but before the Payment Date, you ceased to own a Wesfarmers share in respect of which the return of capital was payable, the right to receive the return of capital in respect of that share is retained by you and is a separate CGT asset from the Wesfarmers share. For more information about this return of capital, see Class Ruling CR 2003/105W: Return of capital: Wesfarmers Limited. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021. ITAA 1997 115-25(1) The return of capital was announ Make sure you have the information for the right year before making decisions based on that information. However paragraph (d) of the definition of dividend specifically excludes a distribution from the meaning of 'dividend' if the amount of the distribution is debited against an amount standing to the credit of the company's share capital account. A capital benefit was provided to Wesfarmers' shareholders. A Wesfarmers shareholder will make a capital gain if the amount of the return of capital ($0.50 per fully paid share) is more than the cost base of the Wesfarmers share (subsection 104-135(3) of the ITAA 1997). TR 2006/10 The term 'share capital account' is defined in section 975-300 as an account which the company keeps of its share capital, or any other account created on or after 1 July 1998 where the first amount credited to the account was an amount of share capital. 55. NO 1-4UM8A44, Related Rulings/Determinations: ITAA 1936 45B(2)(a) 56. Wesfarmers has advised that, at the time CGT event G1 happens for any foreign resident Wesfarmers shareholder who is entitled to the return of capital, a Wesfarmers share will not be an indirect Australian real property interest (as defined in section 855-25 of the ITAA 1997). The distribution was entirely capital in nature. Maria must also adjust the cost base and the reduced cost base of her Wesfarmers shares to nil. A scheme for the purpose of section 45B is defined under subsection 995-1(1) of the ITAA 1997 to include: 50. How did the capital return work and what was the effect on the company? 40. Taxation Administration Act 1953. The following description of the scheme is based on information provided by the applicant. Section 45B - schemes to provide capital benefits. The payment of the return of capital to Wesfarmers shareholders will not be a dividend, as defined in subsection 6(1). The return of capital was an equal reduction of capital under section 256B of the Corporations Act 2001 and required shareholder approval by ordinary resolution under section 256C of the Corporations Act 2001. 48. Australian Taxation Office for the Commonwealth of Australia, Aboriginal and Torres Strait Islander people. If Maria uses the indexed cost base for this event, she cannot use the discount method if she sells her Wesfarmers shares later. As a result, you will, in those circumstances, make a capital gain equal to the capital proceeds, being $2.00 per Wesfarmers share owned at the Record Date. 16. ITAA 1997 104-165(3) 30. ITAA 1997 855-30 CGT event G1 happened on the Payment Date when Wesfarmers paid you the return of capital of $2.00 for each Wesfarmers share you owned at the Record Date and continued to own at the Payment Date (section 104-135). shares held within the Deferred Plans at the time of the return of capital payment), the cost base for each share held on behalf of employees was reduced by the return of capital amount. If, after the Record Date but before the Payment Date, a Wesfarmers shareholder ceases to own some, or all, of their shares in Wesfarmers, the right to receive the payment of the return of capital in respect of each of the shares disposed of will be retained by the shareholder and is considered to be a separate CGT asset. The return of capital was paid to each holder of a Wesfarmers share registered on the Wesfarmers share register on the Record Date. Wesfarmers is an Australian-resident company listed on the Australian Securities Exchange since 1984. A Wesfarmers shareholder who is a foreign resident just before CGT event C2 happens, disregards any capital gain or capital loss made when CGT event C2 happens if their right to the return of capital is not 'taxable Australian property' (section 855-10 of the ITAA 1997). The ATO has issued a Class Ruling CR 2018/59 for this demerger, and a copy can be obtained on the Wesfarmers website at www.wesfarmers.com.au. ITAA 1936 45B(9) Specifically, the provision applies where: 48. Division 230 does not apply to individuals unless they have made an election for it to apply. For more information on how to work out the cost base and the reduced cost base of shares, see the Guide to capital gains tax. On 27 August 2021, Wesfarmers announced that it will return share capital to Wesfarmers shareholders of $2.00 per Wesfarmers share totalling $2.3 billion (return of capital). As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. ITAA 1997 116-20(1) 14 December 2018 Demerger of Coles Group Limited - ATO Class Ruling The Australian Commissioner of Taxation has today issued Class Ruling CR 2018/59 (Class Ruling) covering the Australian income tax implications of the demerger of Coles Group Limited (Coles) for shareholders of Wesfarmers Limited (Wesfarmers).The Class Ruling confirms the availability of demerger tax relief for certain . Make sure you have the information for the right year before making decisions based on that information. Wesfarmers has advised the total market value of its assets that are not taxable Australian real property is greater than the market value of its taxable Australian real property assets. ITAA 1936 44 This publication (excluding appendix) is a public ruling for the purposes of the Taxation Administration Act 1953. ITAA 1997 104-25(3) capital gains tax Wesfarmers Chemicals, Energy and Fertilisers, People development, diversity and inclusion, Chairman and Managing Director's 2022 sustainability message, Bunnings collaborates with Indigenous artists through exclusive plant pots range, Bunnings support for flood affected communities, Bunnings launches national battery recycling programs, Bunnings expands fleet with all electric trucks, Information for participants of the Wesfarmers employee share plans. Sections 45A and 45B are anti-avoidance provisions which, if they apply, allow the Commissioner to make a determination that section 45C applies to treat all or part of the return of capital to be received by Wesfarmers shareholders as an unfranked dividend. ITAA 1997 Div 110 If you feel that our information does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice. Wesfarmers has obtained a Class Ruling CR 20from the ATO which governs the Australian tax21/87 treatment of the return of capital to Wesfarmers shareholders who hold their shares on capital account. TAA 1953 No part of the return of capital paid to you by Wesfarmers on the Payment Date is a dividend as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Although a 'capital benefit' (as defined in paragraph 45A(3)(b)) will be provided to participating Wesfarmers shareholders under the return of capital, the circumstances of the return of capital indicate that there will be no streaming of capital benefits to some shareholders and dividends to other shareholders. 10. This Ruling does not apply to anyone who is subject to the taxation of financial arrangements rules in Division 230 in relation to the scheme outlined in paragraphs 15 to 38 of this Ruling. In working out the capital gain or capital loss when CGT event C2 happens, the capital proceeds are equal to the amount of the return of capital ($2.00 per Wesfarmers share) (subsection 116-20(1)). Wesfarmers' retained earnings (on a stand-alone basis) for the year ended 30 June 2021 was $697 million post-payment of the final dividend for the year. On 3November 2003 Wesfarmers Limited announced a return of capital ('capital return'). How much did I receive and how was the payment made? The payment was entirely capital in nature with no dividend component. The capital return was undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. Sections 45A, 45B and 45C of the ITAA 1936 do not apply 8. 25. It is anticipated that shareholder approval will be sought at Wesfarmers' Annual General Meeting (AGM) which is scheduled for 7 November 2013. 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